John's Finance Corner: Labor Market: Not as Strong as We Thought
Last week’s Quarterly Census of Employment and Wages (QCEW) revealed a stunning revision: job growth between April 2024 and March 2025 was overstated by 911,000 jobs. That’s an average of 76,000 jobs per month—meaning more than half of the reported gains during that period never actually happened. It’s the largest downward adjustment on record and paints a much weaker picture of the labor market than previously believed.
This matters because Fed policy is deeply influenced by labor data. If the Fed had been working with more accurate numbers all along, interest rates might look very different today.
Jobless Claims Reinforce the Trend
Initial jobless claims rose sharply last Thursday, climbing by 27,000 to 263,000—the highest level since 2021 and well above expectations. Continuing claims held steady at 1.939 million, marking the 16th consecutive week above 1.9 million. Together, these figures reinforce the narrative: the labor market is cooling.
Inflation Holds Steady
On the inflation front, the Consumer Price Index (CPI) rose 0.4% in August, slightly above monthly forecasts. Annual inflation landed at 2.9%, right in line with expectations. The uptick was largely driven by energy costs, especially gasoline, which jumped nearly 2%.
Meanwhile, wholesale inflation eased. The Producer Price Index (PPI) dropped 0.1% in August, bringing the annual rate down to 2.6% from 3.1% the month prior. Core PPI, which excludes food and energy, also declined by 0.1%, lowering the annual core rate to 2.8%.
What to Expect from the Fed
The Federal Reserve begins its two-day policy meeting this Tuesday, with a decision on interest rates expected Wednesday. Markets widely anticipate a cut to the benchmark Fed Funds Rate. But remember: while a Fed rate cut can influence mortgage rates, it doesn’t guarantee them. Much of the recent drop in mortgage rates may already reflect investor anticipation of this move.
Bottom Line
With labor data softening and inflation staying near expectations, the Fed may be ready to act. Whether rates drop further or stabilize, the housing market could benefit from a more accommodative stance.
Want to talk through what this means for you?
I’m here to help you make sense of the numbers and explore how today’s shifts could shape your next steps.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
